UPDATE 1-Portugal PM says economy recovering, wants smooth bailout exit

Thu Jul 18, 2013 11:57am EDT

LISBON, July 18 (Reuters) - Portugal's prime minister said on Thursday the economy may have grown in the second quarter as he defended his record against a no-confidence motion that the ruling coalition is set to defeat in parliament.

A painful austerity drive under Portugal's 78-billion-euro EU/IMF bailout has pushed the country into its worst recession since the 1970s, but Passos Coelho said growing exports and external surpluses offered signs of a turnaround.

"As a result of all these signs, it is increasingly likely that in the second quarter that ended in June we registered economic growth, precisely what the Portuguese have justly been waiting for," he said.

The prime minister added that he will continue to work for the country to exit the bailout programme "in a controlled and credible fashion".

The centre-right ruling coalition that has a comfortable parliament majority is expected to easily defeat the no-confidence motion later on Thursday after overcoming an internal rift.

Disagreement within the ruling coalition on austerity policies earlier this month sparked a political crisis that has threatened Portugal's plans to exit the bailout smoothly in June 2014.

President Anibal Cavaco Silva has requested the coalition and the main opposition Socialists reach a broad political deal that will allow Portugal to complete its bailout and then hold early elections. The parties have given themselves until Sunday to reach agreement.

"The country needs a Socialist Party that can accept the president's request so we can launch the concrete and realistic basis of our collective future," Passos Coelho said.

The Socialists have said they will support the no-confidence motion, but said the process - tabled by the small Green Party - would only serve the coalition's interests.

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